One of the chemical fertilizers produced by Ozone Chemicals passes two processes. In Process 1, normal losses are 20% of input whilst in Process 2 normal losses are 10% of input. The losses can be sold for RM1.20 per kg for Process 1 and RM1.40 per kg for Process 2. For February 2007, the following data were recorded:- Process 1 Direct material of 9,000 kg at RM1.65 per kg Direct labour cost of RM8,330(RM3.40 per hour) Production overhead is absorbed at RM2.60 per direct labour hour Actual output was 7,000 kg Process 2 Additional material
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
One of the chemical fertilizers produced by Ozone Chemicals passes two processes. In Process 1, normal losses are 20% of input whilst in Process 2 normal losses are 10% of input. The losses can be sold for RM1.20 per kg for Process 1 and RM1.40 per kg for Process 2.
For February 2007, the following data were recorded:-
Process 1
Direct material of 9,000 kg at RM1.65 per kg
Direct labour cost of RM8,330(RM3.40 per hour)
Production
Actual output was 7,000 kg
Process 2
Additional material of 600 kg of RM 1.80 per kg
Direct labour of 1,000 hours ( RM3.40 per hour)
Production overhead absorbed RM 2,900
Actual output was 6,900 kg.
Note: The price per unit is to be calculated to four decimal places and all other calculations are to be rounded up to nearest RM.
Required:
a. Prepare Process 1 and Process 2 Accounts of the company.
b. Normal Loss Account
c. Abnormal loss/ Gain account (if any)
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